One of the most crucial elements of financial planning is the income tax. You must strategically plan to purchase life insurance, a term plan, or any other tax-saving investment to avoid tax. You must also keep track of your assets and income.
In addition to income tax, the government also collects taxes from other sources. By imposing them on purchases of products, services, and transactions, it also obtains indirect taxes from us, such as TDS, TCS, and GST. People who earn money pay Direct taxes. If there are indirect taxes, the seller is now responsible for remitting the tax to the government.
Two of the government's most important revenue sources are TDS and TCS. And to avoid penalties and maintain compliance, businesses make timely tax payments.
TDS refers to Tax Deducted (or Withheld) at the source. According to Section 194Q, the income tax division requires any business or person to withhold tax at source from payments made for the purchases of goods and services, such as rent, consultation, legal fees, royalties, etc., that exceed Rs. 50 lakhs.
According to the Income Tax Act, the government predetermines the TDS rates.
A party that withholds TDS from payment is the deductor, and those who receive are the deductees.
Tax Collected at Source or TCS the buyer pays at the time of purchase. As in Section 206C of the Income Tax Act of 1961, TCS covers certain goods and services. TCS has a threshold of Rs. fifty lakhs for selling commodities.
There are a few key characteristics that set the two tax systems apart:
Interest received on fixed deposits is withheld by financial institutions as TDS.
However, you can declare the same in Forms 15G or 15H if your yearly income is below the taxable threshold. Financial institutions won't be able to deduct TDS because of this.
An individual or business must fulfill their tax responsibilities on schedule. If you submit your income tax returns on time, you should return tax deductions from your pay. On the other hand, if you have collected TCS, you should regularly deposit with the banks.